Transparency is an important part of our culture
Transparency is an important part of our business culture.
We want to ensure that our clients have full and complete understanding of the charges they pay to an investment or product provider, investment fund managers and, of course, any fees that they pay to us as their Financial Planner.
Before we start work with a new client we write to them with an engagement letter. This letter sets out precisely what we will do for them and at what cost.
Our Financial Planning fees are always explicit.
We charge a fixed monetary amount and write that into the engagement letter.
Once quoted, we standby that fee. We don’t increase it if, for example, it takes longer to complete the work than we anticipated.
Experience tells us that a fixed fee is preferred by our clients to an hourly rate. This is perhaps because of a not unreasonable fear that work expands to fill the available time!
We are also against ad valorem fees where the fee is a percentage of any monies that might be invested.
Such fees are often used in conjunction with what is known as contingent charging. This is where the client only pays a fee when they buy a pension or investment product via the adviser.
We think contingent charging introduces a bias where the adviser leads to an investment product recommendation, possibly where an investment product isn’t really needed, in order for the adviser to be paid.
We believe that the real value we deliver to our clients is in the Financial Planning process which we generate by working with them.
This week a potential new client asked us to explain it in more detail how we had arrived at the fee price we had quoted to them.
We explained that we calculate the fee based on internal pricing mechanism which is based around the acronym VERP.
VERP stands for value, expertise, risk and profit.
We have a base price that we charge for the Financial Planning process and we increase that charge based on the complexity of the client situation.
By the way, the price we quote in the engagement letter also covers the cost of any implementation work that we need to do for our clients.
Whilst implementation establishing any financial product is not unimportant, we don’t believe it’s the most valuable part of the work we do for our clients.
Part of our charging methodology is about the expertise we have to employ to deliver our professional services to our clients. Part of the cost reflects the degree of regulatory risk for delivery of advice.
This includes payments to the Financial Services Compensation Scheme (FSCS), and our professional indemnity insurance premiums. These regulatory costs amount to many £10,000’s each year.
And finally we factor in some profit so that we can reinvest in the business and deliver our professional services to our clients for decades to come.
We aim to be neither the cheapest nor the most expensive when we deliver our Financial Planning services.
We always aim to be great value for money.